“I’m not sure we should lay out $335,000 for that automated welding machine,” said Jim Alder, president of the Superior Equipment Company. “That’s a lot of money, and it would cost us $91,000 for software and installation, and another $56,400 per year just to maintain the thing. In addition, the manufacturer admits it would cost $54,000 more at the end of three years to replace worn-out parts.”

“I admit it’s a lot of money,” said Franci Rogers, the controller. “But you know the turnover problem we’ve had with the welding crew. This machine would replace six welders at a cost savings of $121,000 per year. And we would save another $8,200 per year in reduced material waste. When you figure that the automated welder would last for six years, I’m sure the return would be greater than our 18% required rate of return.”

“I’m still not convinced,” countered Mr. Alder. “We can only get $20,500 scrap value out of our old welding equipment if we sell it now, and in six years the new machine will only be worth $37,000 for parts. But have your people work up the figures and we’ll talk about them at the executive committee meeting tomorrow.”

Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables.

Required:

1. Compute the annual net cost savings promised by the automated welding machine.

2a. Using the data from (1) above and other data from the problem, compute the automated welding machine’s net present value.

2b. Would you recommend purchasing the automated welding machine?

3. Assume that management can identify several intangible benefits associated with the automated welding machine, including greater flexibility in shifting from one type of product to another, improved quality of output, and faster delivery as a result of reduced throughput time. What minimum dollar value per year would management have to attach to these intangible benefits in order to make the new welding machine an acceptable investment?

Last month Empire Company had a $40,850 profit on sales of $301,000. Fixed costs are $88,580 a month. By how much would sales be able to decrease for Empire to still break even?

A. $95,000

B. $341,850

C. $206,000

D. $129,430

orley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 8%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $108 to purchase these supplies.

For years, Worley believed that the 8% markup covered its selling and administrative expenses and provided a reasonable profit. However, in the face of declining profits, Worley decided to implement an activity-based costing system to help improve its understanding of customer profitability. The company broke its selling and administrative expenses into five activities as shown:

Worley gathered the data below for two of the many hospitals that it serves—University and Memorial (each hospital purchased medical supplies that had cost Worley $35,000 to buy from manufacturers):

Required:

1. Compute the total revenue that Worley would receive from University and Memorial.

2. Compute the activity rate for each activity cost pool.

3. Compute the total activity costs that would be assigned to University and Memorial.

4. Compute Worley’s customer margin for University and Memorial. (Hint: Do not overlook the $35,000 cost of goods sold that Worley incurred serving each hospital.)

The current asset section of the Excalibur Tire Company’s balance sheet consists of cash, marketable securities, accounts receivable, and inventory. The December 31, 2021, balance sheet revealed the following: Inventory $ 1,000,000 Total assets $ 4,000,000 Current ratio 2.20 Acid-test ratio 1.40 Debt to equity ratio 1.5 Determine the following 2021 balance sheet items:

a. Current Assets?

b. Shareholder's Equity?

c. Long-term assets?

d. Long-term liabilities?

Part 1: Explain and provide a real life business example for equivalent units. Explain the importance and main purpose for equivalent units.

You are responsible for updating the predetermined overhead rate for your company, analyzing the current costs, using projected changes, and creating the rate for the next year. You notice the maintenance cost had almost doubled last year compared to prior years. You need to analyze this situation more and determine ways to better track this increase. The factory manager has suggested you spread the costs over all the departments to smooth the increase.

1. Determine a costing system to use to help better analyze the increase. Explain how this system will allow for future analysis to identify the increases.
2. If the manager pushes to spread the costs, what are the options you have to ensure you are protecting the company from irregular increases?

Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc., to dispense frozen yogurt products under The Yogurt Place name. Mr. Swanson has assembled the following information relating to the franchise:

1. A suitable location in a large shopping mall can be rented for $4,700 per month.
2. Remodeling and necessary equipment would cost $390,000. The equipment would have a 10-year life and a $39,000 salvage value. Straight-line depreciation would be used, and the salvage value would be considered in computing depreciation.
3. Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $500,000 per year. Ingredients would cost 20% of sales.
4. Operating costs would include $90,000 per year for salaries, $5,500 per year for insurance, and $47,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Inc., of 14.0% of sales.

Required:

1. Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet.

2-a. Compute the simple rate of return promised by the outlet.

2-b. If Mr. Swanson requires a simple rate of return of at least 21%, should he acquire the franchise?

3-a. Compute the payback period on the outlet.

3-b. If Mr. Swanson wants a payback of two years or less, will he acquire the franchise?

Jamie and Cecilia Reyes are husband and wife and file a joint return. They live at 5677 Apple Cove Road, Boise ID 83722. Jaime’s social security number is 412-34-5670 (date of birth 6/15/1969) and Cecilia’s is 412-34-5671 (date of birth 4/12/1971). They provide more than half of the support of their daughter, Carmen (age 23). Social security number 412-34-5672. (date of birth 9/1/1995), who is a full-time veterinarian school student. Carmen received a $3,200 scholarship covering her room and board at college. She was not required to perform any services to receive the scholarship. Jaime and Cecilia furnish all of the support of Maria (Jamie’s grandmother), Social Security number 412-34-5673 (date of birth 11/6/1948), who is age 70 and lives in a nursing home. They also have a son, Gustavo (age 4), social security number 412-34-5674 (date of birth 3/14/2014). The Reyes and all of their dependents had qualifying health care coverage at all time during the tax year.

Jaime’s W-2 contained the following information:

Federal Wages (box 1) = $145,625.00

Federal W/H (box 2) = $ 16,112.25

Social Security wages (box 3) = $128,400.00

Social Security W/H (box 4) = $7,960.80

Medicare Wages (box 5) = $145,625.00

Medicare W/H (box 6) = $2,111.56

State Wages (box 16) = $145,625.00

State W/H (box 17) = $5.435.00

Other receipts for the couple were as follows:

Dividends (all qualified dividends) $2,500

Interest Income:

Union Bank $ 220

State of Idaho – Interest on tax refund $22

City of Boise School bonds $1,250

Interest from U.S savings bonds $410 (not used for educational purposes)

2017 federal income tax refund received in 2018 $2,007

2017 state income tax refund received in 2018 $218

Idaho lottery winnings $1,100

Casino slot machine winnings $2,250

Gambling losses at casino $6,500

Other information that the Reyeses provided for the 2018 tax year:

Mortgage interest on personal residence $11,081

Loan interest on fully equipped motor home $3,010

Doctor’s fee for a face lift for Mr. Reyes $8,800

Dentist’s fee for a new dental bridge for Mr. Reyes $3,500

Vitamins for the entire family $110

Real estate property taxes paid $5,025

DMV fees on motor home (tax portion) $1,044

DMV fees on family autos (tax portion) $436

Doctor’s bills for grandmother $2,960

Nursing Home for grandmother $10,200

Wheelchair for grandmother $1,030

Property Taxes on boat $134

Interest on personal credit card $550

Interest on loan to buy public school district bonds $270

Cash contributions to church (all contributions)    $6,100

Were in cash and none more than $250 at any one time)

Cash contribution to man at bottom of freeway off-ramp    $25

Contribution of furniture to Goodwill -cost basis    $4,000

Contribution of same furniture to listed above Goodwill -Fair market Value $410

Tax Return preparation fee for 2017 taxes $625

Required

Prepare a Form 1040 and appropriates schedules, Schedule A and Schedule B for the completion of the Reyes’s tax return. They do not want to contribute to the Presidential election campaign and do not want anyone to be a third-party designee. For any missing information, make reasonable assumptions. They had qualifying health coverage at all times during the year.

After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey wondered if it was time to critically analyze overhead costs at Business Solutions. In a recent month, Santana found that setup costs, inspection costs, and utility costs made up most of its overhead. Additional information about overhead follows.

Overhead has been applied to output at a rate of 50% of direct labor costs. The following data pertain to Job 615.

Required:
1. Classify each of its three overhead activities as unit level, batch level, product level, or facility level.
  

2. What is the total cost of Job 615 if Business Solutions applies overhead at 50% of direct labor cost?
  

3. What is the total cost of Job 615 if Business Solutions uses activity-based costing?

On January 1, 2018, Mania Enterprises issued 12% bonds dated January 1, 2018, with a face amount of $20.1 million. The bonds mature in 2027 (10 years). For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)

Required:
1. Determine the price of the bonds at January 1, 2018.
2. Prepare the journal entry to record the bond issuance by Mania on January 1, 2018.
3. Prepare the journal entry to record interest on June 30, 2018, using the effective interest method.
4. Prepare the journal entry to record interest on December 31, 2018, using the effective interest method.

A ten year loan of $10,000 at 8% annual effective can be repaid using any of the four following methods: (i) Amortization method, with annual payments at the end of each year. (ii) Repay the principal at the end of ten years while paying the 8% annual effective interest on the loan at the end of each year. In addition, make level annual deposits at the end of each year into a sinking fund earning 6% annual effective so that the sinking fund accumulates to $10,000 at the end of the 10th year. (iii) Same as ii, except that the sinking fund earns 8% annual effective. (iv) Same as ii, except that the sinking fund earns 12% annual effective. Rank the annual payment amounts of each method.

Question 4 Brown Manufacturing has four categories of overhead. The four categories and expected overhead costs for each category for next year are listed below: N$ Maintenance 200 000 Materials handling 32 000 Setups 100 000 Inspection 120 000 Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labour hours. For next year, 50 000 direct labour hours are budgeted. The company has accepted a new job and the sales manager wanted to have a cost estimate. The production department provided the following information for the new job: Direct materials N$6 000 Direct labour (1 000 hours) N$10 000 Machine hours 500 Number of material moves 12 Number of setups 2 Number of inspections 10 In the past, full manufacturing cost has been calculated by allocating overhead using a volume-based cost driver (direct labour hours). With the information supplied by the production department, the bookkeeper requested you to assist them with the introduction of an activity based costing system. You collected the following expected activity for the four activity based cost drivers: Machine hours 20 000 Material moves 1 600 Setups 2 500 Quality inspections 4 000 Required: 4.1 Determine the amount of overhead that would be allocated to the proposed job if a plant wide rate with direct labours is used. 4 4.2 Determine the total cost of the proposed job. 3 4.3 Determine the amount of overhead that would be applied to the proposed project if activity based drivers are used. 4 4.4 Determine the total cost of the proposed job if activity based costing is used. 7

Preston Company manufactures car seats in its San Antonio plant. Each car seat passes through the assembly department and the testing department. This problem focuses on the assembly department.

Degree of​ completion: direct​ materials, ?%; conversion​ costs, 60​%.

Degree of​ completion: direct​ materials, ?%; conversion​ costs, 75​%.

E6-22 Computing Target Profit, Preparing Contribution Margin Income Statement, Computing Margin of Safety [LO 6-2, 6-3]

Erin Shelton, Inc., wants to earn a target profit of $880,000 this year. The company’s fixed costs are expected to be $1,160,000 and its variable costs are expected to be 60 percent of sales. Erin Shelton, Inc., earned $780,000 in profit last year.

Required:
1. Calculate break-even sales for Erin Shelton, Inc.


  
2. Prepare a contribution margin income statement on the basis break-even sales. (Do not leave any cells blank, enter a zero wherever required.)



3. Calculate the required sales to meet the target profit of $880,000.



4. Prepare a contribution margin income statement based on sales required to earn a target profit of $880,000.



5. When the company earns $880,000 of net income, what is its margin of safety and margin of safety as a percentage of sales? (Round your "Percentage Sales" answer to 2 decimal places. (i.e. .1234 should be entered as 12.34%.))

Can someone show me how this is supposed to look in a table format. I want to double check that I'm formatting and doing the numbers properly. Thank you!

Timber Construction constructs furniture.  They’ve decided they need to layout out their budgets for the first Quarter of 2019 to see if they will make a profit and have cash for a future expansion that will cost $400,000. They always must keep $100,000 minimum in the checking account every month.  (Assume the beginning of the Quarter has the minimum cash balance.)  The CEO also wants to have a minimum of a 10% profit margin for the Quarter to ensure stability. The CEO has said she wants to sell 5000 units in January, 6000 units in February, and 5500 in March.  Looking forward into the second Quarter, she hopes to sell 7000 units in April.  Each item sale price will be set at $150/unit. To build each unit, the purchasing agent says he can get the lumber for $50/unit, paint for $4/unit, and miscellaneous supplies for $5/unit.  The production manager, based on past experience, says it costs about 2 hours/unit at $20/hour in labor costs.  You are able as CFO to pull the other costs for the budgets:  Utilities are about $6/unit, Factory salaries run $25,000/month, Factory property taxes average $5,000/month, and depreciation on Factory equipment is $22,000/month.  Advertising costs average $4,000/month.  Sales Commission is .5% of Gross Sales.  CEO Salary is $150,000/year; CFO Salary is $120,000/year; Admin Assistant is $48,000/year. (Ignore payroll taxes.)  Miscellaneous office expenses are about $1,000/month. Office Equipment is depreciated at $500/month.  Cash payments are processed in the month of.  The CEO would like 40% of next month’s production ready to sell so there is no shortages. Cash is collected 60% in the month of sale, and the remainder in the following month.  Expected balances for certain accounts are listed below for your use.

Accounts Receivable on 1/1 is $240,000

Accounts Payable on 1/1 is $180,000

Accounts Payable on 3/31 is $200,000

Retained Earnings on 1/1 is $1,400,000

Income Tax Rate is 30%

Finished Goods, 1/1 is $160,000

Finished Goods, 3/31 is $280,000

WIP, 1/1 is $20,000

WIP, 3/31 is $25,000

Raw Materials desired beginning, 1/1 is $60,000 (Lumber $49,000; Paint $5,000; Misc. Supplies $6,000)

Raw Materials desired ending, 3/31 is $84,000 (Lumber $70,000; Paint $6,000; Misc. Supplies $8,000)

What was the 3/31 balance in Accounts Receivable?

Will they have enough money on March 31 to move forward with the expansion?  Why or why not?

What is the profit margin? Does it meet the CEO’s minimum requirement?

Prepare a Sales Budget, Production Budget, Direct Materials Budget, Direct Labor Budget, Factory Overhead Budget, Cost of Goods Sold, Selling & Admin Expense Budget, Proforma Income Statement, Cash Receipts Budget, Cash Payments Budget, Cash Budget.

Use formulas and cell references when using Excel.